8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): March 2, 2017

WINGSTOP INC.

(Exact name of registrant as specified in its charter)

Delaware	001-37425	47-3494862
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(IRS Employer Identification No.)
5501 LBJ Freeway, 5th Floor, Dallas, Texas		75240
(Address of principal executive offices)		(Zip Code)

(972) 686-6500

(Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition

The following information is furnished pursuant to Item 2.02, “Results of Operations and Financial Condition.” Consequently, it is not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liabilities of that section. It may only be incorporated by reference in another filing under the Securities Exchange Act of 1934 or Securities Act of 1933 if such subsequent filing specifically references this Form 8-K.

On March 2, 2017, Wingstop Inc. issued a press release reporting the Company’s financial results for its fourth fiscal quarter ended December 31, 2016. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated by reference herein in its entirety. The press release uses the following non-GAAP financial measures: EBITDA, Adjusted EBITDA, adjusted net income, adjusted pro-forma share count and adjusted earnings per pro-forma diluted share. A discussion of these financial measures, including a discussion of the usefulness and purpose of each measure, is included below.

EBITDA and Adjusted EBITDA. EBITDA and Adjusted EBITDA are supplemental measures of our performance that are not required by, or presented in accordance with, U.S. GAAP. EBITDA and Adjusted EBITDA are not measurements of our financial performance under U.S. GAAP and should not be considered as an alternative to net income or any other performance measure derived in accordance with U.S. GAAP, or as an alternative to cash flows from operating activities as a measure of our liquidity.

We define “EBITDA” as net income before interest expense, net, income tax expense, and depreciation and amortization. We define “Adjusted EBITDA” as EBITDA further adjusted for management fees and expense reimbursement, management agreement termination fees, transaction costs, gains and losses on the disposal of assets, and stock-based compensation expense. We caution investors that amounts presented in accordance with our definitions of EBITDA and Adjusted EBITDA may not be comparable to similar measures disclosed by our competitors, because not all companies and analysts calculate EBITDA and Adjusted EBITDA in the same manner. We present EBITDA and Adjusted EBITDA because we consider them to be important supplemental measures of our performance and believe they are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. Management believes that investors’ understanding of our performance is enhanced by including these non-GAAP financial measures as a reasonable basis for comparing our ongoing results of operations. Many investors are interested in understanding the performance of our business by comparing our results from ongoing operations period over period and would ordinarily add back non-cash expenses such as depreciation and amortization, as well as items that are not part of normal day-to-day operations of our business.

Management uses EBITDA and Adjusted EBITDA:

• as a measurement of operating performance because they assist us in comparing the operating performance of our restaurants on a consistent basis, as they remove the impact of items not directly resulting from our core operations;

• for planning purposes, including the preparation of our internal annual operating budget and financial projections;

• to evaluate the performance and effectiveness of our operational strategies;

• to evaluate our capacity to fund capital expenditures and expand our business; and

• to calculate incentive compensation payments for our employees, including assessing performance under our annual incentive compensation plan and determining the vesting of performance shares.

By providing these non-GAAP financial measures, together with a reconciliation to the most comparable GAAP measure, we believe we are enhancing investors’ understanding of our business and our results of operations, as well as assisting investors in evaluating how well we are executing our strategic initiatives. Items excluded from these non-GAAP measures are significant components in understanding and assessing financial performance. In addition, the instruments governing our indebtedness use EBITDA (with additional adjustments) to measure our compliance with covenants such as fixed charge coverage, lease adjusted leverage and debt incurrence. EBITDA and Adjusted EBITDA have limitations as analytical tools, and should not be considered in isolation, or as an alternative to, or a substitute for net income or other financial statement data presented in our consolidated financial statements as indicators of financial performance. Some of the limitations are:

• such measures do not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments;

• such measures do not reflect changes in, or cash requirements for, our working capital needs;

• such measures do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments on our debt;

• such measures do not reflect our tax expense or the cash requirements to pay our taxes;

• although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and such measures do not reflect any cash requirements for such replacements; and

• other companies in our industry may calculate such measures differently than we do, limiting their usefulness as comparative measures.

Due to these limitations, EBITDA and Adjusted EBITDA should not be considered as measures of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our U.S. GAAP results and using these non-GAAP measures only supplementally. As noted in the attached exhibit, Adjusted EBITDA includes adjustments for transaction costs, gains and losses on disposal of assets and stock-based compensation, among other items. It is reasonable to expect that these items will occur in future periods. However, we believe these adjustments are appropriate because the amounts recognized can vary significantly from period to period, do not directly relate to the ongoing operations of our restaurants and complicate comparisons of our internal operating results and operating results of other restaurant companies over time. In addition, Adjusted EBITDA includes adjustments for other items that we do not expect to regularly record, such as management fees and expense reimbursement. Each of the normal recurring adjustments and other adjustments described in this paragraph and in the attached exhibit help management with a measure of our core operating performance over time by removing items that are not related to day-to-day operations.

Adjusted Net Income, Pro-forma Diluted Share Count and Adjusted Earnings per Pro-forma Diluted Share. Adjusted net income represents net income adjusted for management fees, transaction costs related to refinancings of our credit agreement and our public offerings and related tax adjustments that management believes are not indicative of the Company’s core operating results or business outlook over the long-term. However, it is reasonable to assume that transaction costs for financing transactions may occur in future periods. Pro forma diluted share count reflects weighted average shares outstanding - diluted that are adjusted to give effect to the additional 2,150,000 shares of common stock issued in our initial public offering in June 2015 as if all shares had been outstanding as of December 28, 2013. Adjusted earnings per pro-forma diluted share is defined as Adjusted net income divided by pro-forma diluted share count. Adjusted net income, pro-forma diluted share count and adjusted earnings per pro-forma diluted share are supplemental measures of operating performance that do not represent and should not be considered alternatives to net income and earnings per share, as determined by GAAP. These measures have not been prepared in accordance with Article 11 of Regulation S-X. Management believes adjusted net income, pro-forma share count and adjusted earnings per pro-forma diluted share supplement GAAP measures and enables them to more effectively evaluate the Company’s performance period-over-period and relative to competitors.

Item 9.01 Financial Statements and Exhibits

(d)    Exhibits

99.1    Press release, dated March 2, 2017 (furnished to the Commission as part of this Form 8-K).

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

			Wingstop Inc.
			(Registrant)
Date:	March 2, 2017	By:	/s/ Michael F. Mravle
			Chief Financial Officer (Principal Financial and Accounting Officer)

EXHIBIT INDEX

Exhibit Number	Description
99.1	Press Release, dated March 2, 2017.

EX-99.1

FOR IMMEDIATE RELEASE

Wingstop Inc. Reports Fiscal Fourth Quarter 2016 Financial Results

Announces Annual Guidance for Fiscal Year 2017

Dallas, March 2, 2017 - (GLOBE NEWSWIRE) - Wingstop Inc. (NASDAQ: WING) today announced fiscal fourth quarter and fiscal year 2016 financial results for the period ended December 31, 2016 and annual guidance for fiscal year 2017.

Highlights for the Fiscal Fourth Quarter 2016 compared to the Fiscal Fourth Quarter 2015

▪ Total revenue increased20.3% to $24.8 million

▪ System-wide restaurant count increased 18.1% to 998 worldwide locations

▪ Domestic same store sales increased 1.0%

▪ Net income increased to $4.3 million, or $0.15 per diluted share, compared to $3.8 million, or $0.13 per diluted share

▪ Adjusted EBITDA*, a non-GAAP measure, increased27.1% to $10.0 million

▪ Adjusted net income*, a non-GAAP measure, increased15.5% to $4.4 million

▪ Adjusted earnings per pro-forma diluted share*, a non-GAAP measure, increased15.4% to $0.15 from the prior fiscal year

Highlights for the Fiscal Year 2016 compared to the Fiscal Year 2015

▪ Total revenue increased17.2% to $91.4 million

▪ 153 net openings in fiscal year 2016, an increase of 15.0% compared to 133 net openings in fiscal year 2015

▪ Domestic same store sales increased 3.2%

▪ Net income increased to $15.4 million, or $0.53 per diluted share, compared to $10.1 million, or $0.36 per diluted share

▪ Adjusted EBITDA*, a non-GAAP measure, increased23.2% to $35.6 million

▪ Adjusted net income*, a non-GAAP measure, increased24.2% to $16.9 million

▪ Adjusted earnings per pro-forma diluted share*, a non-GAAP measure, increased23.4% to $0.58 from the prior fiscal year

* Adjusted EBITDA, adjusted net income and adjusted earnings per pro-forma diluted share are non-GAAP measures. Reconciliations of adjusted EBITDA, adjusted net income and adjusted earnings per pro-forma diluted share to the most directly comparable financial measures presented in accordance with GAAP, are set forth in the schedules accompanying this release. See “Non-GAAP Financial Measures.”

President and Chief Executive Officer Charlie Morrison stated, “2016 was an incredibly productive year at Wingstop as we executed on our key strategic and financial objectives and delivered exceptionally strong results for our shareholders.  Our system-wide restaurant count grew 18.1% including 153 net new store openings, and we ended the year with 998 restaurants worldwide.  We have now passed the 1,000 restaurant milestone, reflecting yet another step torward our goal of 2,500+ domestic restaurants and living out our mission to Serve the World Flavor.”

Morrison continued, “2016 marks our 13th consecutive year of positive same-store sales growth and another record number of unit openings, delivering 23.2% and 24.2% increases in adjusted EBITDA and adjusted net income, respectively.”

Morrison concluded, “We are excited about 2017. We recently launched national advertising, which is expected to provide us with more reach and frequency in existing media markets and first-time coverage for smaller and newer markets where did not previously leverage TV and radio.  We believe national advertising and growth in our online channels will position us well.”

Key Operating Metrics for the Fiscal Fourth Quarter 2016 Compared to the Fiscal Fourth Quarter 2015

	Fiscal Quarter Ended
	December 31, 2016			December 26, 2015
Number of system-wide restaurants open at end of period	998			845
Number of domestic franchise restaurants open at end of period	901			767
Number of international franchise restaurants open at end of period	76			59
System-wide sales (in thousands)	$	265,175		$	217,582
System-wide domestic same store sales growth	1.0		%	5.9		%
Net income (in thousands)	$	4,312		$	3,795
Adjusted EBITDA (in thousands)	$	10,031		$	7,895

Fiscal Fourth Quarter 2016 Financial Results

Total revenue for the fiscal fourth quarter 2016increased20.3% to $24.8 million from $20.6 million in the fiscal fourth quarter last year.

▪ Royalty revenue and franchise fees increased$3.1 million to $15.6 million from $12.5 million in the fiscal fourth quarter last year. This was primarily due to a 18.3% increase in the number of franchised restaurants, domestic same store sales growth of 1.0%, and approximately $0.9 million of additional revenue from the 53rd week.

▪ Company-owned restaurant sales increased$1.1 million to $9.1 million from $8.0 million in the fiscal fourth quarter last year. The increase was the result of company-owned domestic same store sales growth of 1.0%, the opening of two company-owned restaurants in the Dallas area during the second and fourth fiscal quarters of 2016 and approximately $0.6 million of additional revenue from the 53rd week.

Cost of sales increased23.4% to $7.0 million from $5.6 million in the prior fiscal year’s fourth quarter. As a percentage of company-owned restaurant sales, cost of sales increased590 basis points to 76.1% from 70.2%. The increase was driven primarily by a 13.1% increase in commodities rates for bone-in chicken wings as compared to the prior year period, an increase in the average size of chicken wings, and an increase in labor as we make investments in roster sizes and staffing to support the continued top line growth in our company-owned restaurants, and increases related to pre-opening expenses and the ramp up of one company-owned restaurant that opened during the fourth fiscal quarter of 2016 as it achieves normal efficiency.

Selling, general & administrative expenses (SG&A) increased13.4% to $8.7 million compared to $7.7 million in the prior fiscal year’s fourth quarter. The increase in SG&A expense is primarily due to headcount additions to support our continued growth, non-recurring professional fees of $0.1 million incurred in the current fiscal fourth quarter related to our secondary offering, and estimated incremental costs associated with the 53rd week of $0.6 million.

Net income increased to $4.3 million, or $0.15 per diluted share, compared to net income of $3.8 million, or $0.13 per diluted share in the prior fiscal year’s fourth quarter. The impact of the 53rd week on net income was $0.2 million.

Adjusted net income increased15.5% to $4.4 million, or $0.15 per pro-forma diluted share, compared to $3.8 million, or $0.13 per pro-forma diluted share, in the prior fiscal year’s fourth quarter. A reconciliation between net income and adjusted net income, as well as diluted shares to pro-forma diluted shares is included in the accompanying financial data.

Key Operating Metrics for the Fiscal Year 2016 Compared to the Fiscal Year 2015

	Fiscal Year Ended
	December 31, 2016			December 26, 2015
Number of system-wide restaurants open at end of period	998			845
Number of domestic franchise restaurants open at end of period	901			767
Number of international franchise restaurants open at end of period	76			59
System-wide sales (in thousands)	$	972,270		$	821,248
System-wide domestic same store sales growth	3.2		%	7.9		%
Net income (in thousands)	$	15,434		$	10,106
Adjusted EBITDA (in thousands)	$	35,576		$	28,879

Fiscal Year 2016 Financial Results

Total revenue for fiscal year 2016increased17.2% to $91.4 million from $78.0 million in the prior fiscal year.

▪ Royalty revenue and franchise fees increased$10.4 million to $57.1 million from $46.7 million in the prior fiscal year. This was primarily due to a 18.3% increase in the number of franchised restaurants and domestic same store sales growth of 3.2%. Also contributing to the increase is $1.1 million of contributions received from vendors for the franchisee convention. The convention is held every 18 months, and there was no convention in 2015.

▪ Company-owned restaurant sales increased$3.0 million to $34.3 million from $31.3 million in the prior fiscal year. The increase was the result of company-owned domestic same store sales growth of 5.4% and the opening of two company-owned restaurants in the Dallas area during 2016.

Cost of sales increased13.9% to $25.3 million from $22.2 million in the prior fiscal year. As a percentage of company-owned restaurant sales, cost of sales increased280 basis points to 73.8% from 71.0%. The increase was driven primarily by a 4.4% increase in commodities rates for bone-in chicken wings as compared to the prior fiscal year, an increase in the average size of chicken wings, an increase in labor as we make investments in roster sizes and staffing to support the continued top line growth in our company-owned restaurants, and increases related to pre-opening expenses and the ramp up of two company-owned restaurants that opened during 2016 as they achieve normal efficiency.

SG&A increased1.5% to $33.8 million compared to $33.4 million in the prior fiscal year. The increase is primarily due to $1.1 million in expenses related to the franchisee convention, which occurs every 18 months and did not occur in 2015, expenses related to the 53rd week, and increases related to headcount additions and other recurring costs associated with being a public company incurred in the current fiscal year. SG&A expense in the prior fiscal year included a one-time fee of $3.3 million, paid in consideration for the termination of our management agreement with Roark Capital Management.

Net income increased to $15.4 million, or $0.53 per diluted share, compared to net income of $10.1 million, or $0.36 per diluted share in the prior fiscal year.

Adjusted net income increased24.2% to $16.9 million, or $0.58 per pro-forma diluted share, compared to $13.6 million, or $0.47 per pro-forma diluted share, in the prior fiscal year. A reconciliation between net income and adjusted net income, as well as diluted shares to pro-forma diluted shares is included in the accompanying financial data.

Restaurant Development

As of December 31, 2016, there were 998 Wingstop restaurants system-wide. This included 922 restaurants in the United States, of which 901 were franchised restaurants and 21 were company-owned. Our international presence consisted of 76 franchised restaurants across five countries. During the fiscal fourth quarter 2016, there were 49 net system-wide Wingstop openings, including nine international franchised locations.

Fiscal Year 2017 Financial Outlook

For the fiscal year ending December 30, 2017, we are providing the following financial outlook, which is consistent with our long-term guidance:

• System wide unit growth of approximately 13% to 15%

• Low single digit domestic same store sales growth

• SG&A expenses of between $34 million and $35 million

• Net income between $18.5 million and $18.8 million

• Fully diluted EPS growth of 8% - 10%, which reflects 29.3 million diluted shares outstanding, over 2016 adjusted earnings per diluted share of $0.58

• Adjusted EBITDA growth of 13% - 15%

	Fiscal Year Ended
	December 30, 2017
	(in millions)
	Low		High
Net income	$	18.5	$	18.8
Interest expense, net	5.6		5.6
Income tax expense	11.1		11.3
Depreciation and amortization	3.3		3.3
EBITDA	$	38.5	$	39.0
Additional adjustments:
Stock-based compensation expense (a)	1.6		1.8
Adjusted EBITDA	$	40.1	$	40.8
(a) Estimated non-cash, stock-based compensation.

The following definitions apply to these terms as used in this release:

Same store sales reflects the change in year-over-year sales for the comparable restaurant base. We define the comparable restaurant base to include those restaurants open for at least 52 full weeks. This measure highlights the performance of existing restaurants, while excluding the impact of new restaurant openings and closures.

System-wide sales represents net sales for all of our company-owned and franchised restaurants, as reported by franchisees.

Adjusted EBITDA is defined as net income before interest expense, net, income tax expense, and depreciation and amortization (EBITDA) further adjusted for management fees and expense reimbursement, management agreement termination fees, transaction costs, gains and losses on the disposal of assets, and stock-based compensation expense. We caution investors that amounts presented in accordance with our definitions of EBITDA and Adjusted EBITDA may not be comparable to similar measures disclosed by our competitors, because not all companies and analysts calculate EBITDA and Adjusted EBITDA in the same manner.

Adjusted net income is defined as net income plus management fees, transactions costs and non-cash gains and losses resulting from the disposal of assets, minus related adjustments to income tax expense.

Adjusted earnings per pro-forma diluted share is defined as adjusted net income divided by pro-forma diluted share count.

Conference Call and Webcast

Charlie Morrison, President and Chief Executive Officer, and Mike Mravle, Chief Financial Officer, will host a conference call today to discuss fiscal fourth quarter 2016 financial results and the fiscal year 2017 financial outlook at 5:00 PM Eastern Time.

The conference call can be accessed live by dialing 201-689-8562. A replay will be available two hours after the call and can be accessed by dialing 844-512-2921; the passcode is 13653650. The replay will be available through Thursday, March 9, 2016.

The conference call will also be webcast live and later archived on the investor relations section of Wingstop’s corporate website at ir.wingstop.com under the ‘News & Events’ section.

About Wingstop

Founded in 1994 and headquartered in Dallas, Texas, Wingstop Inc. (NASDAQ:WING) operates and franchises more than 1,000 restaurants across the United States, Mexico, Singapore, the Philippines, Indonesia, and the United Arab Emirates. The Wing Experts’ menu features classic and boneless wings with 11 bold, distinctive flavors including Original Hot, Cajun, Atomic, Mild, Teriyaki, Lemon Pepper, Hawaiian, Garlic Parmesan, Hickory Smoked BBQ, Louisiana Rub, and Mango Habanero. Wingstop’s wings are always cooked to order, hand-sauced and tossed and served with a variety of house-made sides including fresh-cut, seasoned fries. Having grown its domestic same store sales for 13 consecutive years, the Company has been ranked #3 on the “Top 100 Fastest Growing Restaurant Chains” by Nation’s Restaurant News (2016), #7 on the “Top 40 Fast Casual Chains” by Restaurant Business (2016), and was named “Best Franchise Deal in North America” by QSR magazine (2014). Wingstop was ranked #88 on Fortune’s 100 Best Medium Workplaces list in October 2016. For more information visit www.wingstop.com or www.wingstopfranchise.com.  Follow us onfacebook.com/Wingstop and Twitter @Wingstop.

Non-GAAP Financial Measures

To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use non-GAAP financial measures including those indicated above. By providing non-GAAP financial measures, together with a reconciliation to the most comparable GAAP measure, we believe we are enhancing investors’ understanding of our business and our results of operations, as well as assisting investors in evaluating how well we are executing our strategic initiatives. These measures are not intended to be considered in isolation or as substitutes for, or superior to, financial measures prepared and presented in accordance with GAAP. The non-GAAP measures used in this press release may be different from the measures used by other companies. A reconciliation of each measure to the most directly comparable GAAP measure is available in this news release. In addition, the Current Report on Form 8-K furnished to the SEC concurrent with the issuance of this press release includes a more detailed description of each of these non-GAAP financial measures, together with a discussion of the usefulness and purpose of such measures.

Forward-looking Information

Certain statements contained in this news release, as well as other information provided from time to time by Wingstop Inc. or its employees, may contain forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. You can identify forward-looking

statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “guidance,” “anticipate,” “estimate,” “expect,” “forecast,” “project,” “plan,” “intend,” “believe,” “confident,” “may,” “should,” “can have,” “likely,” “future” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. Examples of forward-looking statements in this news release include our fiscal year 2017 outlook for new restaurant openings, domestic same store sales growth, total revenue, SG&A expenses, net income, EBTIDA, adjusted EBITDA, adjusted net income, adjusted earnings per pro-forma diluted share and our diluted share count, as well as our anticipated potential domestic restaurant expansion opportunity and positioning to make progress towards domestic restaurant potential.

Any such forward looking statements are not guarantees of performance or results, and involve risks, uncertainties (some of which are beyond the Company’s control) and assumptions. Although we believe any forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect our actual financial results and cause them to differ materially from those anticipated in any forward-looking statements. Please refer to the risk factors discussed in our Form 10-K for the year ended December 31, 2016, which can be found at the SEC’s website www.sec.gov. The discussion of these risks is specifically incorporated by reference into this news release.

Any forward-looking statement made by Wingstop Inc. in this press release speaks only as of the date on which it is made. We undertake no obligation to update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

Media Contact

Joy Murphy

646-277-1242

wingstop@icrinc.com

Investor Contact

Raphael Gross

203-682-8253

raphael.gross@icrinc.com

WINGSTOP INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(amounts in thousands, except share and per share amounts)

	December 31, 2016			December 26, 2015
	(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	3,750		$	10,690
Accounts receivable, net	3,199			3,404
Prepaid expenses and other current assets	1,634			1,752
Advertising fund assets, restricted	2,533			3,774
Total current assets	11,116			19,620
Property and equipment, net	4,999			4,593
Goodwill	45,128			45,128
Trademarks	32,700			32,700
Customer relationships, net	16,914			18,296
Other non-current assets	943			313
Total assets	$	111,800		$	120,650
Liabilities and stockholders' deficit
Current liabilities
Accounts payable	$	1,458		$	1,252
Other current liabilities	9,241			7,544
Current portion of debt	3,500			—
Advertising fund liabilities, restricted	2,533			3,774
Total current liabilities	16,732			12,570
Long-term debt, net	147,217			95,008
Deferred revenues, net of current	7,868			7,623
Deferred income tax liabilities, net	12,304			13,018
Other non-current liabilities	2,307			2,104
Total liabilities	186,428			130,323
Commitments and contingencies
Stockholders' deficit
Common stock, $0.01 par value; 100,000,000 shares authorized; 28,747,392 and 28,581,182 shares issued and outstanding as of December 31, 2016 and December 26, 2015, respectively	287			286
Additional paid-in-capital	1,194			36,870
Accumulated deficit	(76,109		)	(46,829		)
Total stockholders' deficit	(74,628		)	(9,673		)
Total liabilities and stockholders' deficit	$	111,800		$	120,650

WINGSTOP INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(Unaudited)

(amounts in thousands, except per share data)

	Fiscal Quarter Ended
	December 31, 2016		December 26, 2015
Revenue:
Royalty revenue and franchise fees	$	15,608	$	12,544
Company-owned restaurant sales	9,144		8,033
Total revenue	24,752		20,577
Costs and expenses:
Cost of sales (1)	6,956		5,639
Selling, general and administrative	8,720		7,692
Depreciation and amortization	821		738
Total costs and expenses	16,497		14,069
Operating income	8,255		6,508
Interest expense, net	1,538		713
Other expense, net	—		14
Income before income tax expense	6,717		5,781
Income tax expense	2,405		1,986
Net income	$	4,312	$	3,795
Earnings per share
Basic	$	0.15	$	0.13
Diluted	$	0.15	$	0.13
Weighted average shares outstanding
Basic	28,745		28,581
Diluted	29,114		28,951
(1) exclusive of depreciation and amortization, shown separately

WINGSTOP INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(Unaudited)

(amounts in thousands, except per share data)

	Fiscal Year Ended
	December 31, 2016		December 26, 2015
Revenue:
Royalty revenue and franchise fees	$	57,071	$	46,688
Company-owned restaurant sales	34,288		31,281
Total revenue	91,359		77,969
Costs and expenses:
Cost of sales (1)	25,308		22,219
Selling, general and administrative	33,840		33,350
Depreciation and amortization	3,008		2,682
Total costs and expenses	62,156		58,251
Operating income	29,203		19,718
Interest expense, net	4,396		3,477
Other expense, net	254		396
Income before income tax expense	24,553		15,845
Income tax expense	9,119		5,739
Net income	$	15,434	$	10,106
Earnings per share
Basic	$	0.54	$	0.37
Diluted	$	0.53	$	0.36
Weighted average shares outstanding
Basic	28,637		27,497
Diluted	28,983		27,816
(1) exclusive of depreciation and amortization, shown separately

WINGSTOP INC. AND SUBSIDIARIES

Unaudited Supplemental Information

	Fiscal Quarter Ended				Fiscal Year Ended
	December 31, 2016		December 26, 2015		December 31, 2016		December 26, 2015
Domestic Franchised Activity:
Beginning of period	862		737		767		652
Openings	41		31		137		118
Closures	(2	)	(1	)	(3	)	(3	)
Restaurants end of period	901		767		901		767
Domestic Company-Owned Activity:
Beginning of period	20		19		19		19
Openings	1		—		2		—
Closures	—		—		—		—
Restaurants end of period	21		19		21		19
Total Domestic Restaurants	922		786		922		786
International Franchised Activity:
Beginning of period	67		51		59		41
Openings	9		9		20		24
Closures	—		(1	)	(3	)	(6	)
Restaurants end of period	76		59		76		59
Total System-wide Restaurants	998		845		998		845

WINGSTOP INC. AND SUBSIDIARIES

Non-GAAP Financial Measures - EBITDA and Adjusted EBITDA

(Unaudited)

(in thousands)

	Fiscal Quarter Ended				Fiscal Year Ended
	December 31, 2016		December 26, 2015		December 31, 2016		December 26, 2015
Net income	$	4,312	$	3,795	$	15,434	$	10,106
Interest expense, net	1,538		713		4,396		3,477
Income tax expense	2,405		1,986		9,119		5,739
Depreciation and amortization	821		738		3,008		2,682
EBITDA	$	9,076	$	7,232	$	31,957	$	22,004
Additional adjustments:
Management fees (a)	—		—		—		237
Management agreement termination fee (b)	—		—		—		3,297
Transaction costs (c)	116		—		2,388		2,186
Stock-based compensation expense (d)	839		663		1,231		1,155
Adjusted EBITDA	$	10,031	$	7,895	$	35,576	$	28,879

(a) Includes management fees and other out-of-pocket expenses paid to Roark Capital Management, LLC.

(b) Represents a one-time fee of $3.3 million that was paid in consideration for the termination of our management agreement with Roark Capital Management during the second quarter of 2015 in connection with our initial public offering. There are no further obligations related to management fees paid to Roark Capital Management.

(c) Represents costs and expenses related to refinancings of our credit agreement and our public offerings; all transaction costs are included in SG&A with the exception of $215,000 that is included in Other expense, net during the year endedDecember 31, 2016 and $172,000 during the year endedDecember 26, 2015.

(d) Includes non-cash, stock-based compensation.

WINGSTOP INC. AND SUBSIDIARIES

Non-GAAP Financial Measures - Adjusted Net Income,

Pro-forma Diluted Shares and Adjusted EPS

(Unaudited)

(in thousands, except per share data)

	Fiscal Quarter Ended					Fiscal Year Ended
	December 31, 2016			December 26, 2015		December 31, 2016			December 26, 2015
Numerator:
Net income	$	4,312		$	3,795	$	15,434		$	10,106
Adjustments
Management fees (a)	—			—		—			237
Management agreement termination fee (b)	—			—		—			3,297
Transaction costs (c)	116			—		2,388			2,186
Tax effect of adjustments (d)	(44		)	—		(896		)	(2,201		)
Adjusted net income	$	4,384		$	3,795	$	16,926		$	13,625
Denominator:
Weighted-average shares outstanding - diluted	29,114			28,951		28,983			27,816
Adjustments
Assumed issuance of shares in connection with the IPO (e)	—			—		—			981
Pro-forma weighted-average shares outstanding - diluted	29,114			28,951		28,983			28,797
Adjusted earnings per pro-forma diluted share	$	0.15		$	0.13	$	0.58		$	0.47

(a) Includes management fees and other out-of-pocket expenses paid to Roark Capital Management, LLC.

(b) Represents a one-time fee of $3.3 million that was paid in consideration for the termination of our management agreement with Roark Capital Management during the second quarter of 2015 in connection with our initial public offering. There are no further obligations related to management fees paid to Roark Capital Management.

(c) Represents costs and expenses related to refinancings of our credit agreement and our public offerings; all transaction costs are included in SG&A with the exception of $215,000 that is included in Other expense, net during the year endedDecember 31, 2016 and $172,000 during the year endedDecember 26, 2015.

(d) Represents the tax effect of the aforementioned adjustments to reflect corporate income taxes at assumed effective tax rates of 37.5% and 38.6% for the periods ended December 31, 2016 and December 26, 2015, respectively, which includes provisions for U.S. federal income taxes, and assumes the respective statutory rates for applicable state and local jurisdictions.

(e) Adjustment to give effect to shares issued in the Company’s initial public offering as if the shares were issued and outstanding as of December 27, 2014.